Fiscal stimulus and increased money supply, mainstays
of the present approach to rescue the U.S. economy, have only a loose
connection
to the creation
of jobs in the United States. The cash subsidies to banks have been used
to pay bonuses to present bank employees and buy other banks as well as
stimulate lending. Since receiving bailout money, such institutions
have increased
their request for H-1B visas to bring foreign workers into this country
instead of hiring Americans. This trickle-down approach to
job creation won’t
work. The government can’t force people or banks to use money in
a particular way.

Additionally,
the existing measures that borrow money (in the trillions
of dollars) for immediate job creation will put a strain on future taxpayers.
The share of
the federal budget devoted to interest payments (to the Chinese central bank
and others) will increase. The federal government itself may have to pay
a higher interest rate if its borrowing becomes excessive. Expanded
money
supply in relation
to fixed or declining Gross Domestic Product will produce inflation.

What
to Do

The
federal government needs to target its regulatory activities to creation
of jobs for U.S. citizens both to stabilize the economy
and restore confidence
among potential consumers. It needs to focus on the physical basis
of jobs - in particular, labor. The first three proposals have to do
with
amending
the
Fair Labor Standards Act of 1938.

(1)
To promote a four-day workweek, Congress and the Administration
should amend the Fair Labor Standards Act (FLSA)
with respect to the standard
workweek.
The 40-hour standard workweek should be replaced by a 32-hour
standard workweek. In subsection (a)(1) of the law, strike out “forty” hours
and insert in its place “thirty-two hours”. A similar
change should take place in subsection (b)(3). This change will
require overtime
pay
(time-and-one-half)
to be paid after a covered employee works thirty-two hours in
a week rather than forty.

(2) Remove
the FLSA exemption with respect to managerial and professional
employees. Delete the exemption to the overtime-payment
rule in Section
13 (1) : “any
employee employed in a bona fide executive, administrative or professional
employee.” Exemptions
might remain for self-employed workers, CEOs and others who
can effectively set their own work schedules, and seasonal
workers.

(3) Add
a section to the Fair Labor Standards Act or to the tax code
that would convert overtime pay from extra compensation for the
employee to a tax
due the federal
government. The employer would still be required to pay the half-time
premium for overtime work but the employee would not benefit
from doing
this work.
The premium wage would be instead paid to the government.

***** *** ***** *** ***** *** ***** *** ***** *** ***** *** *****

Should
the federal government mandate a certain adjustment in the rate of
pay
while work hours change? No, let the free market
work.
At first
glance,
it
would seem that workers currently employed would lose income
by working fewer weekly
hours at a fixed rate of pay. In the long run, however, pay
rates are set by the law of supply and demand. Supply is defined
in
terms of
worker-hours.
This
means the number of people employed by the average number
of hours that they work in a given period of time. A legislated
reduction
in the average
workweek
would shrink labor supply. Reduced supply in combination
with a fixed level of demand increases the price of the commodity,
which
in this
case is human
labor.

While
the resulting increase in employment would tend to increase labor supply,
this would take place more slowly.
It would also
result in
increased consumer
demand, again tending to increase the price of labor. Studies
have shown a positive correlation between wages and reductions
in work
hours. (See
Paul H. Douglas,
Real Wages in the United States: 1890-1926.) This
has sometimes been called the Simiand effect.

***** *** ***** *** ***** *** ***** *** ***** *** *****
*** *****

However, the law of supply and demand only works within
a closed system. If the labor supply is open-ended,
the price
of labor
may not rise.
Instead, employers
will hire from a pool of workers outside the system.
So, to restore confidence in U.S. employment, the federal
government
needs to
close the system. This
can
be done in three ways:

(1) Crack
down on illegal immigration. Impose tighter border security, improve
techniques of documentation,
and
sanction employers
hiring workers who
have entered the
United States illegally.

(2) End
or sharply curtail the H-1B visa program that allows foreigners temporarily
to enter the United
States to
take jobs. Surely,
with the amount of money
spent on education, the United States can or does
produce enough people to fill the
jobs that require special skills.

(3) End
our uncritical commitment to free trade. We should instead develop
a new model of
trade focused
on environmental
protection
and economic
development. This means that national governments
should be permitted to use tariffs
to
enforce certain regulatory objectives. NAFTA,
the WTO, and other international trade
agreements would need to be modified to permit
such use of tariffs. The precondition is
a new international
consensus
to replace “free trade” that
would promote objectives such as these:

(a)
Unemployment is a problem in all industrialized nations which is best
addressed by shorter hours
of work.

(b)
National governments that allow unusually long
work hours or low
rates of pay relative to their stage of industrial
development may fairly be sanctioned
by the international community. Compensatory
tariffs may be placed on products exported
from them.

(c)
Similar sanctions can be applied to
businesses which
produce goods in a way that despoils the
natural environment. Whatever cost savings are achieved
in this way would be offset by increased
tariffs.

The
U.S. Government cannot unilaterally change the world trading system
although it would
have much
influence upon the process.
The first step
is, therefore,
a broad set of discussions with governments
and others around the world for the purpose
of achieving
a new
consensus
with
respect to economic
development. Domestically,
national governments can use taxes to
enforce regulation; internationally, they can use
tariffs. Ultimately,
the world trading system
should not pit nation against
nation but instead allow nations individually
and collectively to regulate international
business to the benefit of
the world’s people and
the natural environment. This can be
done through a system of employer-specific
tariffs.

Other
considerations
or techniques pertinent to job creation:

(1)
If the present “time-and-one-half” pay
provision does not create a sufficient
incentive for employers to eliminate
overtime work, the Fair Labor
Standards Act can be amended in subsection
(b) by striking “time-and-one-half” and
substituting “two times” or
some other number that would make it
more costly to schedule overtime work.

(2)
Health-care costs are a powerful disincentive
to hiring new employees. We need to
reduce the cost
of health
care, not
merely increase
insurance coverage.
The problem with this industry is
that government-sanctioned monopolies control
the
supply and insurance - i.e., someone
else pays - is the primary mechanism
for
payment. However, replacement of
this badly flawed system with another goes
beyond
the scope of
this paper.

(3)
The payroll or FICA tax is a close second to the income tax in raising
money for
the federal
government.
This
is a tax
on income
earned
from wages. We
need to tax investment income more
heavily and reduce the tax burden
for working
people and employers who engage
their services.